Q1 surge lifted full-year progress, but the sustainability of gains on share sales is the focus for FY2027-H1

Q1 ordinary income was ¥50,443 million, ordinary profit was ¥11,306 million, and net income attributable to owners of the parent was ¥8,077 million. Compared with ordinary income of ¥34,140 million, ordinary profit of ¥5,117 million, and net income of ¥3,790 million in the year-earlier period, the increases were 47.8%, 120.9%, and 113.1%, respectively. Profit growth substantially outpaced ordinary income growth, so it is necessary to examine not only simple business expansion but also the earnings mix and the impact of securities transactions.

The company cited growth in other ordinary income from higher gains on sales of shares and other securities, as well as increases in interest and dividends on securities and interest on loans, as factors behind the increase in ordinary income. It also explained that other operating expenses rose because of higher losses on sales of government bonds and other bonds. However, the amounts by which gains on sales of shares and other securities, interest and dividends on securities, interest on loans, and losses on sales of government bonds and other bonds each increased or decreased have not been disclosed. As a result, it is not currently possible to separate the portion of the ¥8,077 million in net income generated by recurring interest income from the portion exposed to market transactions.

The full-year forecasts are ¥41,200 million for ordinary profit and ¥28,900 million for net income, putting Q1 progress at 27.4% and 28.0%, respectively. The threshold for reaching half of the full-year forecasts in the first half is ¥20,600 million for ordinary profit and ¥14,450 million for net income. To assess full-year achievement based solely on Q1's strong performance, it will be necessary to confirm whether gains on share sales and losses on bond sales will have the same directional impact in Q2, and whether interest on loans and interest and dividends on securities will continue to grow.

For FY2027-H1, it will be important to disclose the increase in profit by factor, not only the year-on-year growth rate. In particular, it will be necessary to determine whether gains on sales of shares and other securities are one-off gains, whether the increase in interest on loans is accompanied by growth in loan balances or improved yields, and to what extent losses on sales of government bonds and other bonds offset profit. Even if the full-year forecasts of ¥41,200 million and ¥28,900 million are maintained, whether the assumptions underlying the forecasts and the profit level required for the remainder of the year are disclosed will help assess earnings repeatability.